Seeking to consolidate the nation's overpopulated financial sector, finance officials hope to convert over 300 credit cooperatives into a handful of regional agricultural banks. A final decision on the plan is likely to be made later this week.
The move is a major shift in last week's proposal by the ministry's Bureau of Monetary Affairs (金融局) to merge solvent credit divisions of farmer and fishermen associations into new banks. Analysts say that plan was scrapped since the sector is already saturated with financial institutions.
This is the latest plan by the ministry to reform the troubled sector, plagued with organizations on the verge of bankruptcy and frightening overdue loan ratios, according to ministry report.
The average overdue loan ratio of credit cooperatives has been reported to be as high as 15 percent.
Reforming these questionable credit cooperatives by separating them from the supervision of the Council of Agriculture, has long been a top priority financial market reformers.
According to the finance ministry's latest plan, over 300 credit cooperatives will eventually be converted into a far fewer number of so-called regional agricultural banks.
In order to speed up the pace of restructuring credit cooperatives under farmer and fisherman's association, the ministry is going to hold a meeting with officials from the Central Bank of China (中央銀行) and the Council of Agriculture (農委會) later this week to discuss the issue.
Officials said yesterday the ministry is currently planning to conduct merger between credit cooperatives and make the conversion into agro-banks at the same time.
As to the direction of the conversion, ministry officials said the ministry prefers to convert credit cooperatives into regional specialized banks, or agricultural banks.
Since conversion of the credit cooperatives only requires an order from the Executive Yuan, if the Council of Agriculture and the Central Bank of China accept the current proposal from the ministry, officials said an executive order would be issued in March at the earliest.
Then the ministry would start accepting merger applications from credit cooperatives.
Officials said the benefits from such mergers is that the current agricultural finance system could be maintained.
According to the proposal, credit cooperatives must meet two criteria to become a bank. First, the net worth of each credit cooperative has to be positive. Second, the total net worth of a merged credit cooperative has to be higher than NT$2 billion before they can be converted into a bank.